Lions Gate Earnings Miss on Q4 Ests, Fall Y/Y - Analyst Blog

Shares of Lions Gate Entertainment Corp. ( LGF ) tumbled 6.7% during aftermarket trading hours yesterday, following its dismal fourth-quarter fiscal 2014 performance. The quarterly adjusted earnings, including stock-based compensation expense, of 34 cents per share missed the Zacks Consensus Estimate of 39 cents, and slumped 34.6% year over year.

On a GAAP basis, the company delivered earnings of 33 cents per share compared with $1.10 in the year-ago period.

The top line of this Zacks Rank #3 (Hold) stock also had a dismal run with total revenue declining 8.1% to $721.9 million during the quarter. The number also fell short of the Zacks Consensus Estimate of $838.0 million.

During the quarter, the company's adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of roughly $92.0 million fell 20.5% from $115.6 million in the year-ago quarter.

Fiscal 2014

Buoyed by successful blockbuster releases, robust results from filmed entertainment library and a fall in interest costs, Lions Gate's adjusted earnings for fiscal 2014 (including stock-based compensation expense) soared 55.3% to $1.18 per share. Earnings also fared much better than the Zacks Consensus Estimate of $1.08.

On a GAAP basis, the company reported fiscal 2014 earnings of $1.04 a share compared with $1.61 last year.

For the full year, revenue slipped 2.9% to $2,630.3 million, falling short of the Zacks Consensus Estimate of $2,731.0 million. Revenues remained soft as the number of domestic theatrical releases fell to 13 from 19 releases last year. However, this was partly compensated by profits made in Lions Gate's international operations and television production.

During the year, Lions Gate recorded adjusted EBITDA of $370.8 million, up from $329.7 million last year.

Full Year Synopsis

The company's fiscal results were mainly driven by record margins, profits from its blockbuster releases of The Hunger Games: Catching Fire , Now You See Me and Divergent , gains from its collaborations with CBS Corporation ( CBS ), Viacom and Metro−Goldwyn−Mayer Studios Inc. (MGM) and enhanced performance at the cable network, TVGN.

Going forward, management remains optimistic about its performance on the back of a strong business portfolio, sustained improvement in its capital structure and an impressive content pipeline.

Segmental Performance

During the year, Motion Pictures ' revenue of $2,182.9 million declined 6.3% year over year, reflecting weak performances across Theatrical (down 2% to $524.7 million), Television (down 18.9% to $225.3 million), Lionsgate U.K. (down 0.9% to $146.3 million), Home Entertainment (down 7.8% to $829.6 million) and other revenue (down 39.1% to $59.9 million), partly offset by strong International operations (up 7.4% to $397.1 million).

The decline in the Home Entertainment segment revenue was caused by a decrease in worldwide releases in 2014, compared with last year. However, this was partly offset by greater revenues from Managed brands and Other titles of the company.

Television revenue at Motion Pictures fell due to lower number of releases this year than 2013, which comprised the pay TV window for Hunger Games' first film as well as solid revenues from 3 Twilight Saga movies.

Apart from The Hunger Games: Catching Fire , other releases like Escape Plan , Now You See Me and Red 2 also augmented Motion Pictures' International segment revenue. Further, the segment benefited from the lingering performance of last year's The Twilight Saga: Breaking Dawn - Part II.

Television Production revenue jumped 18% to $447.4 million mainly attributable to a rise in revenue from domestic television (up 28.7% to $326.1 million), strong international revenue (up 39.5% to $82.3 million) and other revenue (up 80.8% to $4.7 million), partly offset by a plunge in the home entertainment category (down 46.5% to $34.3 million). Television Production sales were boosted by shows like Nashville , Orange is the New Black , Anger Management , Nurse Jackie and Mad Men .

Financial Details

Lions Gate ended the fiscal with cash and cash equivalents of $25.7 million with film obligations and production loans of $499.8 million and shareholders' equity of $584.5 million.

During fiscal 2014, the company lowered the principal outstanding amount under its revolving credit facility of $800 million to $97.6 million. However, as of May 29, 2014, this balance was reduced to zero.

During the year, contractual cash-based interest expense dipped to $49.0 million from $75.3 million last year.

The company's Film Entertainment backlog increased to $1.2 billion, from $1.1 billion last year.

Also, during the fourth quarter, Lions Gate declared a quarterly dividend of 5 cents a share, payable on May 30, 2014 to stockholders of record as of Mar 31.

Since the company's board raised its share repurchase authorization to $300 million on Dec 17, 2013 from the earlier $150 million, 3,436,017 common shares have been bought back for a total price of $90.5 million as of May 14, 2014.

Lions Gate is a film studio engaged in the production and distribution of motion pictures for theater and straight-to-video release as well as television programming for cable and broadcast networks. Competing with major studios like Twenty-First Century Fox, Inc. ( FOXA ) and Time Warner Inc. ( TWX ), the company is poised for growth, given the content-friendly environment.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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